Undergraduates spend an average of $1,000 a year on course materials, and textbook costs are rising by an average of 6% annually, according to the National Association of College Stores.

Early next year, those scholars will have another choice. Flat World Knowledge, a startup in Nyack, N.Y., will release its first set of online college textbooks. Students can review them for free or pay as little as $20 to print out a tome or $30 to download an iPod-ready audio file.

Two refugees from publishing giant Pearson-Prentice Hall formed Flat World in 2007, snaring $1.5 million in seed money to shake up the $3.7 billion textbook industry.

During the past year, 1,500 faculty members from more than 400 U.S. universities signed a petition calling for affordable textbooks, singling out online textbooks as the most 21st-century solution.

While other companies require users to view advertisements before accessing an e-book, Flat World carries none and charges fees, ranging from $20 to $60, only if students create a printout or an audiobook version of the title. Eric Frank and fellow founder Jeff Shelstad say authors will sign a "creative commons" license that allows instructors to modify the work itself - moving chapters around, for example, or inserting specific examples - while ensuring that the original writer retains the copyright.

The company hopes to make money from student-generated study aids fueled by creative-commons licensing. As of October, the company had signed contracts with 29 authors to write some 20 books. - Melanie Haiken